Management Report of AUDI AG for the 2009 Fiscal Year

Transcription

1 Management Report of AUDI AG for the 2009 Fiscal Year Annual Financial Statements of AUDI AG as at December 31, 2009 Balance Sheet, Income Statement, Notes to the Financial Statements AUDI AG Ingolstadt Germany Phone +49 (0) Fax +49 (0) Financial Communication/ Financial Analysis I/FF-12 Phone +49 (0) Fax +49 (0)

2 AUDI AG Finances Management Report of AUDI AG for the 2009 fiscal year 4 AUDI AG 9 Business and underlying situation 21 Financial performance indicators 22 Social and ecological aspects 30 Risks, opportunities and outlook 39 Disclaimer The fuel consumption and emission figures for the vehicles named in the Management Report of AUDI AG are listed from page 60 onward. 40 Financial Statements of AUDI AG as at December 31, Balance Sheet 41 Income Statement 42 Notes to the Financial Statements 42 Development of fixed assets in the 2009 fiscal year 44 General comments on the Balance Sheet and Income Statement 44 Notes to the Balance Sheet 48 Notes to the Income Statement 50 Other particulars 54 Responsibility Statement 55 Mandates of the Board of Management 56 Mandates of the Supervisory Board 59 Auditor s Report Note: All figures are rounded off, which may lead to minor deviations when added up.

3 4 Management Report of AUDI AG for the 2009 fiscal year AUDI AG STRUCTURE Company The products of AUDI AG make it one of the world s leading carmakers in the premium segment. The vehicles of the Audi brand delight customers with their outstanding, modern design, high build quality and technological innovations. The ambition to fulfill challenging customer expectations by developing pioneering vehicle concepts is manifested in the brand essence Vorsprung durch Technik, which encompasses the brand values sportiness, sophistication and progressiveness. This mission statement is exemplified for the customer in the extensive and steadily growing number of Audi models available. Over the past fiscal year the Audi brand, which celebrated its 100th anniversary in July 2009, demonstrated remarkable competitiveness at a time of distinct economic difficulties, in no small measure thanks to its fresh, attractive product range. The brand outperformed the premium market as a whole in a large number of markets, gaining vital market shares in the process. AUDI VEHICLE DELIVERIES BY REGION 2009 Share in % Germany 228, Europe excluding Germany 390, China (incl. Hong Kong) 158, USA 82, Other 89, Total 949, The headquarters of AUDI AG are located in Ingolstadt, where Technical Development, Sales and Administration as well as the bulk of vehicle manufacturing operations are based. The range of models built there comprises the Audi A3 and A3 Sportback, the A4 car line, the A5 Sportback, the A5 Coupé and the Audi Q5. Bodies for the A3 Cabriolet and for the TT car line are also made in Ingolstadt. The location celebrated its 60th anniversary in Neckarsulm is where AUDI AG builds the A4 Sedan, the A5 Cabriolet, the A6 car line and the A8 luxury sedan. The Neckarsulm plant, too, reached an auspicious milestone last year, celebrating its 40th anniversary. AUDI AG s largest stockholder is Volkswagen AG (Wolfsburg), which currently holds around percent of the capital stock. A control and profit transfer agreement exists between Volkswagen AG and AUDI AG. STRATEGY Audi: the number one premium brand The continuing debate on the future availability of fossil fuels, climate change and social megatrends such as increasing urbanization are generating new issues surrounding the topic of mobility for customers. With its vision of Audi: the number one premium brand, AUDI AG has refined its strategy in preparation for stepping into the role of premium-segment leader. Over and above simply responding to changing requirements by 2020, the goal is actually to reinforce the emotional pull of the car in this new context, and to continue delighting customers in the long term.

4 5 Mission: To delight customers worldwide At the very core of Strategy 2020 is therefore the mission statement: We delight customers worldwide. What this means in practice is that the brand with the four rings offers its customers innovative and emotional products highly efficient Audi models providing an unmistakable product experience that are particularly noted for the familiar attributes of sophistication and reliability. The Audi brand in addition intends to delight its customers with the best brand experience available. Hard evidence of the Audi brand values sophisticated, progressive and sporty is thus provided for every customer and at every point of contact with the customer. The Company specifically focuses product and investment decisions on delivering customer benefit. Implementing this successfully requires on the one hand expertise and agility, and on the other hand the passion that motivates every employee to promote the Audi brand and its products. All activities of the Company reflect a quartet of strategic aims: Superior financial strength Continuous growth Image leader Most attractive employer Management Report 4 AUDI AG 4 Structure 4 Strategy 7 Shares 7 Disclosures required under takeover law 9 Corporate Management declaration 9 System of remuneration for the Supervisory Board and Board of Management 9 Business and underlying situation 21 Financial performance indicators 22 Social and ecological aspects 30 Risks, opportunities and outlook 39 Disclaimer Superior financial strength Another facet that continues to apply for Strategy 2020, and moreover in keeping with a valueoriented corporate management approach, is that growth only meets the premium standards of AUDI AG if it is simultaneously profitable. With regard to earning a better return on investment than the competition, qualitative growth is therefore a top strategic corporate objective. Sustainable, superior financial strength is underpinned in particular by continuously optimizing processes and structures, realizing reduced costs and ensuring systematic investment management. A high level of self-financing safeguards investments, preserving the ability of AUDI AG to innovate and act. The aim is to continue financing investment from self-generated cash flow. Continuous growth Amid its efforts to capitalize on future opportunities for growth in key premium markets, the focus will remain on continuity and quality of growth. The Company s springboard for this undertaking is a fresh, attractive product range, to which numerous new models were added again during the past fiscal year as part of its long-term model initiative. The particular appeal of the new arrivals, such as the Audi A5 Cabriolet, the A4 allroad quattro and the A5 Sportback, lies in their successful blend of emotional design, sportiness, efficiency and everyday suitability. The Audi brand will continue with its model initiative in 2010 in adding further new members to its product family. Among the most notable new arrivals will be the Audi A1 which will appeal above all to young drivers and therefore give customers a taste of the excitement of the Audi brand from an early age and also the next generation of the Audi A8 luxury sedan and the new Audi A7. At the same time, AUDI AG is stepping up its activities in international car markets. For example, a new assembly hall was erected at the Chinese production plant in Changchun for the Audi brand s local CKD production. AUDI AG is helping to boost its presence in the growing Indian market in particular through the gradual creation and expansion of the sales and dealer structure. AUDI AG also has plans for further growth in the United States. The cornerstones of this undertaking will be the extended product range, which received a major boost in 2009 with the advent of the Audi Q5 and Audi Q7 3.0 TDI clean diesel models, and the steady progress made by the brand image in the U.S. market.

5 6 Image leader The basis for lasting success is a strong brand. The Company is therefore eager to keep improving its image position above all through its attractive, fresh product range, and to establish an emotional bond between its customers and the brand. Alongside outstanding quality and sophisticated design, customers in particular want vehicles that embody the Audi brand s proverbial Vorsprung durch Technik. The Company again demonstrated that competitive edge in 2009 by implementing numerous innovative technologies such as lightweight construction, powerful and efficient TDI and TFSI engines, and currently the cleanest diesel technology in the world. The public s enthusiasm was again manifested last year in an array of national and international awards. For example, the Audi brand yet again captured the coveted ADAC Yellow Angel award for the best brand (ADACmotorwelt, issue 2/2009, page 24 ff.). In Auto Zeitung s Image Report 2009 some 20,000 readers voted Audi their favorite car brand for the sixth time in a row (issue 24/2009, page 80 ff.). The brand with the four rings was declared Germany s most attractive car brand in a representative study conducted by Gesellschaft für Konsumforschung (GfK) and commissioned by the brand strategy consultants Brand:Trust. In addition to brand recognition, this study investigated readiness to recommend ( Brands of the Future, August 27, 2009). In the high-profile reader poll Best Cars staged by the trade publication auto motor und sport (issue 4/2009, page 135) the Audi A4, Audi A6 and Audi Q5 models all came in at the top of their respective categories. The ADAC breakdown statistics, which identified the Audi A2, Audi A3 and Audi A6 as the most reliable vehicles in their respective categories, furthermore supplied evidence of the high quality standards of the Audi brand (ADACmotorwelt, issue 5/2009, page 30 ff.). In the Auto Bild Design Award reader poll (Auto Bild, issue 20/2009, page 52 ff.) the Audi brand clinched top spot with the Audi A4 allroad quattro and Audi Sportback concept, as well as a second place for the Audi A5 Cabriolet. The German Design Oscar for the Audi A5 Coupé, the highest official design accolade in Germany ( Design Award of the Federal Republic of Germany 2010, October 23, 2009), and the Golden Steering Wheel 2009 for the A5 Sportback (Bild am Sonntag, issue 45/2009, supplement, page 16) completed the impressive collection of awards received by the end of the year. The brand attribute sportiness equally remains exceptionally important. Accolades for the TT RS and R8 5.2 FSI quattro models meant that the Audi brand featured among the winners of the coveted reader poll Auto Bild Sportscar 2009 (Auto Bild Sportscars, issue 1/2010, page 95). The Company again enjoyed motorsport success in 2009, staging a successful defense of its German Touring Car Masters (DTM) title and clinching the first hat-trick in the history of the DTM. The Audi brand also secured a place on the rostrum in the legendary 24 Hours of Le Mans in 2009 for the 11th year in succession with its R15 TDI. Most attractive employer AUDI AG will remain dependent on highly qualified, dedicated employees if it is to continue to compete successfully. Progressively enhancing its appeal as an employer is therefore of particular strategic importance. As a successful company, AUDI AG is able to offer its personnel attractive working conditions, challenging tasks, commensurate pay and high job security. AUDI AG took the opportunity to thank all its employees for their commitment and hard work by holding anniversary celebrations at the Ingolstadt and Neckarsulm plants in the fall of Regularly conducted internal employee surveys have confirmed a high level of satisfaction among the workforce. Numerous external surveys have moreover attested that AUDI AG is a high-appeal employer. For instance the Company again emerged as the most popular employer among engineers in the renowned graduate survey conducted by the Berlin trendence Institute ( trendence Graduates Barometer Business and Engineering Edition, August 21, 2009).

6 7 SHARES Stock market developments In the wake of the global financial and economic crisis, the drastic slump on stock markets worldwide initially continued unabated at the start of Thanks to the many state rescue packages for the financial sector and supporting measures by leading central banks, the situation on the capital markets then stabilized towards the end of the first quarter. As the year progressed, the increasingly positive business indicators and initial signs of a recovery in the global economy fueled sharp gains on major international stock markets. A resurgence in confidence in stock markets among market players resulted in many indices finishing the year well up. After starting the year at 4,857 points, the German Share Index (DAX) had already retreated conspicuously to below 3,666 points within the first few weeks of the past fiscal year. A marked recovery set in over the months that followed, peaking at 6,012 points in December. Germany s lead index closed 2009 on 5,957 points, thus showing an improvement of 24 percent over the end of the previous year. Management Report 4 AUDI AG 4 Structure 4 Strategy 7 Shares 7 Disclosures required under takeover law 9 Corporate Management declaration 9 System of remuneration for the Supervisory Board and Board of Management 9 Business and underlying situation 21 Financial performance indicators 22 Social and ecological aspects 30 Risks, opportunities and outlook 39 Disclaimer Audi trading price trend Audi shares were unable to buck the general downward trend on stock markets worldwide at the start of the year. The shares of automotive manufacturers moreover came under added pressure as a result of the dramatic slump in demand in certain international car markets. The Company s shares consequently lost considerable ground in the first three months, touching a year-low of EUR 293 in March Nevertheless, underpinned by AUDI AG s outstanding profit performance in a persistently difficult market environment and initial signs of an improvement in the situation on the financial markets, the trading price recovered in the second quarter. After a sideways shift in the third quarter it clearly exceeded the opening price for the year by reaching EUR 500 towards the end of the fourth quarter. The trading price benefited additionally from growing signs of an end to the global recession in the second half of the year, coupled with evidence of a tentative recovery in worldwide demand for cars. Viewed over a five-year period, Audi shares staged an impressive gain in value despite the global financial and economic crisis. The trading price gained around 228 percent compared to January 2005 and therefore clearly outperformed the German Share Index. This development reflects the capital market s deep faith in the Company s strategy, future fitness and competitiveness when considered in the context of the major challenges facing the automotive industry. Profit transfer and compensatory payment to stockholders A control and profit transfer agreement is in force between AUDI AG and Volkswagen AG (Wolfsburg), which controls around percent of the capital stock of the former. In lieu of a dividend payment, outside stockholders receive a compensatory payment. The level of this payment is calculated from the dividend distributed on one Volkswagen AG ordinary share for the same fiscal year, as determined by the Annual General Meeting on April 22, DISCLOSURES REQUIRED UNDER TAKEOVER LAW The following disclosures under takeover law are made pursuant to Section 289, Para. 4 of the German Commercial Code (HGB):

7 8 Capital structure On December 31, 2009, the issued stock of AUDI AG remained unchanged at EUR 110,080,000 and comprised 43,000,000 no-par bearer shares. Each share represents a mathematical share of EUR 2.56 of the issued capital. Stockholders rights and obligations Stockholders enjoy property and administrative rights. The property rights include, above all, the right to a share in the profit (Section 58, Para. 4 of the German Stock Corporation Act [AktG]) and in the proceeds of liquidation (Section 271 of the German Stock Corporation Act), as well as a subscription right to shares in the event of capital increases (Section 186 of the German Stock Corporation Act). The administrative rights include the right to participate in the Annual General Meeting and the right to speak, ask questions, table motions and exercise voting rights there. Stockholders may assert these rights in particular by means of a disclosure and avoidance action. Each share carries an entitlement to one vote at the Annual General Meeting. The Annual General Meeting elects the members of the Supervisory Board to be appointed by it, as well as the auditors; in particular, it decides on the ratification of the acts of members of the Board of Management and Supervisory Board, on amendments to the Articles of Incorporation and Bylaws, as well as on capital measures, on authorizations to acquire treasury shares and, if necessary, on the conduct of a special audit, the dismissal of members of the Supervisory Board within their term of office and on liquidation of the Company. The Annual General Meeting normally adopts resolutions by a simple majority of votes cast, unless a qualified majority is specified by statute. A control and profit transfer agreement exists between AUDI AG and Volkswagen AG (Wolfsburg) as the controlling company. This agreement permits Volkswagen AG to issue instructions. The profit after tax of AUDI AG is to be transferred to Volkswagen AG. Volkswagen AG is obliged to make good any loss. All Audi stockholders (with the exception of Volkswagen AG) receive a compensatory payment in lieu of a dividend. The amount of the compensatory payment corresponds to the dividend that is distributed in the same fiscal year to Volkswagen AG stockholders for each Volkswagen ordinary share. Capital interests exceeding 10 percent of the voting rights Volkswagen AG (Wolfsburg) holds around percent of the voting rights in AUDI AG. For details of the voting rights held in Volkswagen AG, please refer to the Management Report of Volkswagen AG. Composition of the Supervisory Board The Supervisory Board comprises 20 members. Half of them are representatives of the stockholders, elected by the Annual General Meeting; the other half are employee representatives elected by the employees in accordance with the German Codetermination Act. A total of seven of these employee representatives are employees of the Company; the remaining three Supervisory Board members are representatives of the unions. The Chairman of the Supervisory Board, normally a stockholder representative elected by the members of the Supervisory Board, ultimately has two votes on the Supervisory Board in the event of a tie vote, pursuant to Section 13, Para. 3 of the Articles of Incorporation and Bylaws. Section 9, Para. 3 of the Articles of Incorporation and Bylaws stipulates that the term of office for a Supervisory Board member elected to replace a Supervisory Board member who has not fulfilled his term of office ends upon expiry of the term of office of the Supervisory Board member leaving. Statutory requirements and provisions under the Articles of Incorporation and Bylaws on the appointment and dismissal of members of the Board of Management and on the amendment of the Articles of Incorporation and Bylaws The appointment and dismissal of members of the Board of Management are stipulated in Sections 84 and 85 of the German Stock Corporation Act. Members of the Board of Management are accordingly appointed by the Supervisory Board for a period of no more than five years. Reappointment or an extension of the term of office, in each case for no more than five years,

8 9 is permitted. Section 6 of the Articles of Incorporation and Bylaws further stipulates that the number of members of the Board of Management is to be determined by the Supervisory Board and that the Board of Management must comprise at least two persons. Authorizations of the Board of Management in particular to issue new shares and to re-acquire treasury shares According to stock corporation regulations, the Annual General Meeting may grant authorization to the Board of Management for a maximum of five years to issue new shares. The meeting may authorize it, again for a maximum of five years, to issue convertible bonds on the basis of which new shares are to be issued. The extent to which the stockholders have an option on these new shares is likewise decided upon by the Annual General Meeting. The acquisition of treasury shares is regulated by Section 71 of the German Stock Corporation Act. Key agreements by the parent company that are conditional on a change of control following a takeover bid AUDI AG has not reached any key agreements that are conditional on a change of control following a takeover bid. Nor has any compensation been agreed with members of the Board of Management or employees in the event of a takeover bid. Management Report 4 AUDI AG 4 Structure 4 Strategy 7 Shares 7 Disclosures required under takeover law 9 Corporate Management declaration 9 System of remuneration for the Supervisory Board and Board of Management 9 Business and underlying situation 9 Economic environment 11 Research and development 14 Procurement 15 Production 16 Deliveries and distribution 21 Financial performance indicators 22 Social and ecological aspects 30 Risks, opportunities and outlook 39 Disclaimer CORPORATE MANAGEMENT DECLARATION The corporate management declaration pursuant to Section 289a of the German Commercial Code (HGB) is permanently available on the Internet at SYSTEM OF REMUNERATION FOR THE SUPERVISORY BOARD AND BOARD OF MANAGEMENT For information on the system of remuneration for the Supervisory Board and Board of Management, please see the Notes to the Financial Statements under Details relating to the Supervisory Board and Board of Management. BUSINESS AND UNDERLYING SITUATION ECONOMIC ENVIRONMENT Global economic situation The sharp cyclical downturn initially continued at the start of Industrial nations found themselves in recession, with the global downturn also having a marked effect on the economic development of various emerging economies in Asia, Latin America and Central and Eastern Europe. Far-reaching stimulus programs and the expansive monetary policies adopted by many countries then stabilized the economic situation as the year progressed. By the end of the year, the global economy had regained a path of moderate growth. The substantial problems of the first half-year nevertheless meant that global economic output for 2009 as a whole fell by 2.0 (+ 1.9) percent. The recession that the United States entered in summer 2008 was overcome mid-way through However, the ensuing recovery showed only modest vigor, with the result that gross domestic product for 2009 was down 2.4 (+ 0.4) percent on the previous year. The rapid rise in unemployment and the loss of wealth brought on by the real estate crisis in particular eroded consumer spending. Economic output in Western Europe fell sharply by 3.9 (+ 0.5) percent in All countries throughout the region experienced a significant decline in gross domestic product. For example the economy in the UK contracted by 4.8 (+ 0.6) percent, in Italy also by 4.8 ( 1.0) percent and in Spain by 3.6 (+ 0.9) percent. Initial signs of a recovery began appearing in several countries

9 10 from mid-2009 onward. The global economic crisis caused unemployment in the euro zone to rise from 8.2 percent at the start of 2009 to 10.0 percent at the end of The German economy suffered an exceptionally sharp setback at the start of 2009, mainly due to falling exports. A mild economic recovery only set in during the course of the year. The brighter global economic prospects induced a modest improvement in export demand. One factor that played a significant role in shoring up the economy was the government environment bonus for those buying new cars; this measure accounted for the slight growth in consumer spending in Germany. In all, gross domestic product for Germany fell by 5.0 (+ 1.3) percent in the course of The German economy therefore contracted more sharply than at any time since the founding of the Federal Republic of Germany. The national economies of Central and Eastern Europe were also unable to stave off the global downward trend in 2009, and some of those countries experienced a sharp fall in their economic output. The Russian economy in particular fell deeply into recession in the year under review. Economic development in Latin America stabilized following the cyclical slump mid-way through 2009, with the countries in that region benefiting in particular from the recovery in demand for raw materials. Emerging countries in Asia recovered rapidly from the adverse effects of the global economic crisis and were able to report a healthy economic uplift from spring Economic growth in China of 8.7 (9.0) percent virtually emulated the prior-year figure. In India, too, the economy grew vigorously by 6.5 (7.3) percent. On the other hand gross domestic product in Japan declined by 5.2 ( 1.2) percent in International car market Global demand for cars was significantly down in 2009 following the global economic crisis. Western industrial nations, the countries of Central and Eastern Europe and Japan in particular witnessed an unprecedented slump in sales in the first few months of the year. Many countries responded with programs to stabilize car sales, which stimulated demand in the latter part of the year in particular. Worldwide, vehicle sales in the year under review nevertheless fell overall by 6.0 percent to 52.4 (55.7) million passenger cars. In the United States, the consequences of the severe recession in the year under review caused demand for cars to deteriorate once again. The market mood was dominated by continuing consumer reticence; moreover the availability of credit for vehicle financing remained tight. Unit sales of cars in 2009 consequently fell even further by 21.3 percent compared with the already weak prior-year level, to just 10.4 million passenger cars and light commercial vehicles. Registrations of new cars in Western Europe (excluding Germany) totaled 9.9 million units in 2009, down 6.2 percent on the prior-year figures despite the extensive support measures in many countries. Of Western Europe s major car markets, Spain and the UK were the worst affected with registrations down 17.9 percent and 6.4 percent respectively. The Italian car market also retreated slightly by 0.2 percent. The French car market fared better, achieving year-on-year growth of 10.7 percent. The rapid expansion of recent years in demand for cars in Central and Eastern Europe came to an abrupt end in Demand for passenger cars collapsed in many countries throughout the region. The market volume in Russia halved compared with the previous year s figure, to 1.3 million passenger cars. In Latin America the Brazilian car market continued to advance despite the global economic crisis. Sales of passenger cars there exceeded the previous year s tally by 12.8 percent, to reach 2.5 million vehicles. On the other hand the overall car market in Argentina of 378 thousand passenger cars shrank by 11.8 percent. The rate of growth in the Asia-Pacific region again increased sharply in The sales volume there climbed by 19.7 percent to 17.5 million passenger cars in total. Especially in China, state aid promoted the expansion of the car market with the result that the sales figures rose by 53.9 percent to 8.5 million passenger cars. The Indian car market, too, benefited from a further rise in demand and gained 17.3 percent to reach 1.4 million vehicles. The market in Japan nevertheless remained weak. New car registrations were down 7.2 percent to 3.9 million units.

10 11 German car market The German auto market experienced a special boom in 2009, with new registrations growing by 23.2 percent to 3.8 million passenger cars. The main factor at work here was the government environment bonus for private customers. Between February and November 2009 it prompted monthly growth in new car registrations in the double-digit range. The structure of the market was simultaneously transformed, with the proportion of private registrations soaring from 40.2 percent in the previous year to 62.7 percent in 2009, while new registrations for commercial use fell because of the economic crisis. The main players to benefit from the surge in private demand were manufacturers of small and mini cars as well as vehicles in the compact size category, which enjoyed a sharp increase in their market shares. The diesel share of total registrations fell significantly by 13.4 percentage points in the year under review to 30.7 percent as a result of higher sales to private customers, who wanted primarily gasoline models. By contrast, the diesel share of commercial new registrations remained largely stable. Vehicle exports by German manufacturers suffered a sharp downturn of 17.1 percent to 3.4 million units in 2009 due to the global economic crisis. Deliveries of vehicles to the key export region of Western European countries fell by 13.2 percent to 2.1 million passenger cars. With an export volume of just 359 thousand passenger cars, exports to the United States were down by a total of 31.3 percent. The sharp drop in export demand was mirrored by lower domestic production output by German car manufacturers in The production volume of 5.0 million passenger cars was 10.3 percent down on the prior-year figure. The number of German-brand cars built abroad was down 8.3 percent on the previous year at 4.8 million units. Management Report 4 AUDI AG 9 Business and underlying situation 9 Economic environment 11 Research and development 14 Procurement 15 Production 16 Deliveries and distribution 21 Financial performance indicators 22 Social and ecological aspects 30 Risks, opportunities and outlook 39 Disclaimer Management s overall assessment The global economic crisis and the associated collapse in numerous car markets in the past fiscal year presented the automotive industry with one of the biggest challenges of recent decades. Despite the extremely difficult economic environment, AUDI AG held its ground very well throughout the crisis thanks to its excellent ability to compete. The long-term corporate policy yet again paid dividends, because firstly it focuses on progressively optimizing processes and cost structures along the entire value chain, and therefore on permanently improving productivity. The second success factor is the methodical way in which the product range is being expanded. Thanks to its fresh and attractive model range, with modern, efficient engines, the Company pulled through a crisis-ridden 2009 very successfully; deliveries of 949,729 (1,003,469) vehicles of the Audi brand were only 5.4 percent down on the record level achieved one year earlier. AUDI AG s crisis-proof constitution is also reflected in the clear result from ordinary activities of EUR 1.9 billion and a return on sales after tax of 4.8 percent. RESEARCH AND DEVELOPMENT The development of progressive technological concepts is closely linked to the Audi brand through its declared mission statement of Vorsprung durch Technik. The Company therefore brought a large number of innovations to production maturity in the past fiscal year, too. During the year, an average total of 6,308 (6,293) people were employed at AUDI AG in the Research and Development area.

11 12 Technical innovations Car-2-X communication: award for Travolution In August 2009, Ingolstadt was chosen as a Selected Landmark of 2009 in the Germany Land of Ideas initiative of which German President Horst Köhler is patron ( Germany Land of Ideas, August 27, 2009). The award-winner was the Travolution traffic research project in which AUDI AG participated along with the City of Ingolstadt, the Chair of Transport Technology at the Technical University of Munich and systems developer GEVAS software GmbH, Munich. The project, which has already been completed, investigated how to adapt traffic signal controls to momentary traffic levels on Ingolstadt s roads, and set itself the goal of cutting waiting times for vehicles so as to reduce fuel consumption and vehicle emissions. In the successor project Travolution extended, the Company is currently focusing in particular on traffic signal/vehicle communication as well as on rolling out traffic signal optimizations. The active integration of road traffic is being investigated in other interlinked Car-2-X communication projects alongside Travolution. Car-2-X communication refers to the direct exchange of information between a car and other vehicles on the one hand, and a car and its traffic infrastructure on the other, with multiple benefits. An optimized traffic flow that is facilitated by the exchange of data with traffic signals can help to save time and improve efficiency, as in Travolution. Furthermore, the signals emitted by one vehicle in a hazardous situation can alert cars following behind, thus promoting safety. The system can also bring added convenience by displaying vacant parking spaces in the vicinity, for example. New Multi Media Interface (MMI) with touchpad In order to give its customers maximum convenience and more safety, the Company has revised its MMI navigation plus infotainment system and has now integrated navigation, telephone, audio and vehicle data. The result is a concept that is impressive not just for its design and ergonomic layout, but also demonstrably reduces quite significantly the extent to which the driver is distracted from the traffic situation, thanks to the use of a touchpad with handwriting recognition. A destination or a phone number, for instance, can be written on the input field with the index finger of the user s right hand and as well as the Latin alphabet the system recognizes five other scripts, such as Chinese, Japanese and Cyrillic. Because users are able to draw intuitively with their finger and each input is acknowledged with an acoustic signal, the driver can continue to watch the road while making the input. The new MMI touch is available for the first time as an option for the new Audi A8. LED technology: MatrixBeam In MatrixBeam, AUDI AG is developing an adaptive LED high-beam system that allows the driver to activate the high beams without dazzling other road users detected by the system. This lighting technology represents a logical progression from the high-beam assistant, automating the high-beam function with the aid of a camera sensor system. MatrixBeam is in addition based on a special LED headlight, the individual light segments of which can be energized separately. As soon as other road users are detected, the headlight switches off specifically those light segments that would cause dazzling. The driver still benefits from the remaining light segments, which cast their light past the preceding or oncoming vehicle so that visibility is increased compared to conventional low beams. The adaptive MatrixBeam, which is currently still in the advance development phase, therefore extends AUDI AG s lengthy tradition of innovative lighting technology. Innovations for more safety Night vision assistant When driving in the dark with low beams, a driver can only identify pedestrians less than 60 meters away and will therefore have difficulty stopping in time even at speeds as low as 70 kilometers per hour. This is where the new driver assistance system helps: The Audi night vision assistant increases the driver s range of vision in the dark to as much as 300 meters, while

12 13 simultaneously providing a warning when pedestrians have been detected. The driver is now able to respond much sooner. The system functions with the aid of an infrared camera that is mounted in the Audi rings on the radiator grille and measures the difference between the ambient temperature and the temperature of various objects. The thermal image that is produced displays warmer objects lighter and cooler ones darker on the display in front of the driver. Pedestrians, cyclists and also animals therefore appear as very light-colored objects in the image, whereas the remainder of the road stays dark. When the processing software identifies a person s outline, they are specifically highlighted and a warning signal sounds as the driver approaches them. The specially developed thermal imaging camera is an option available for the first time on the new-generation Audi A8. Management Report 4 AUDI AG 9 Business and underlying situation 9 Economic environment 11 Research and development 14 Procurement 15 Production 16 Deliveries and distribution 21 Financial performance indicators 22 Social and ecological aspects 30 Risks, opportunities and outlook 39 Disclaimer Audi pre sense Audi pre sense is a safety package that can identify critical driving situations or use the phase shortly before a potential collision to prepare the vehicle and its occupants so as to minimize its consequences. Various active and passive safety systems are networked into a single, integrated safety system that constantly monitors the readings supplied by numerous different sensors, such as those gauging the vehicle s stability or the driver s momentary response. The comprehensive technical package for identifying dangers well in advance and intervening appropriately makes its first appearance in the new Audi A8. The system is available optionally in a number of different versions that are linked to the various Audi assistance systems. If the Audi pre sense basic system identifies a critical operating situation such as skidding or hard braking, protective measures can be triggered preventively in addition to the ESP function. Depending on the situation, the hazard warning flashers are activated and the side windows and sunroof are closed; the belts of the front seats are also partially or fully tautened. Audi pre sense front uses the sensors for Audi adaptive cruise control to monitor the traffic ahead of the car for a collision risk and then uses Audi braking guard to warn the driver in various levels of escalation if such a situation is identified. As soon as the driver responds, the system steps in to boost braking force as necessary. If the driver does not respond, it can initiate a partial brake application and in extreme cases activate the preventive protective systems. The Audi pre sense rear system mitigates the consequences of a rear impact. In conjunction with the radar sensors for Audi side assist, it monitors traffic behind the car, again affording preventive protection whenever a collision risk is identified. The system responds by closing windows and the sunroof, and tautening the seat belts. Audi pre sense plus combines the various Audi pre sense modules and complements them with the full deceleration function, which can reduce the severity of impact in collisions. Electric mobility At a time of growing efforts to reduce dependence on mineral oil resources and create new options for protecting the climate, technical solutions for the electrification of the driveline are gaining ever increasing significance. AUDI AG is mindful of its responsibility as an automotive manufacturer and is therefore focusing its resources and activities on developing alternative drive systems, alongside further optimizing the total vehicle and the internal combustion engine in order to cut fuel consumption and CO2 emissions (cf. Product-based environmental aspects, page 27 ff.). Instead of retroactively electrifying conventional vehicles, AUDI AG pursues a broader policy when developing electric mobility because the full potential of electric drive can only be exploited if all systems and components are properly coordinated. New-style concepts take into account the specific characteristics and scope of an electrically powered vehicle by combining mechanical energy flows, thermo-management, climate control and driving dynamics to reach a new level of technology.

13 14 The e-performance development project To enable the strategic alignment of all activities in the sphere of electric mobility, AUDI AG has established the e-performance project house to handle the topic of electrification in advance development. This team of lateral thinkers and experts from Technical Development stepped up its activities in October 2009 in the e-performance project, which is being subsidized by the German Federal Ministry of Education and Research. In addition to the project house, the Company has set up a coordinating department for all matters revolving around electrification in production by creating the department Project Steering/Strategy for Vehicle Electrification. The topic is also being discussed in depth in a Company-wide steering committee with members drawn from all corporate divisions. Audi e-tron In fall 2009 the Company unveiled a high-performance sports car with all-electric drive in the guise of the progressive Audi e-tron concept car. Its holistic approach to the development of electric vehicles is unmistakable. Alongside its progressive drive concept and high range, other notable attributes of the Audi e-tron include its design, sportiness, dynamism and the use of innovative communication technologies. The e-tron s electric motors are capable of accelerating it from 0 to 100 km/h in just 4.8 seconds if need be. The range of around 250 kilometers is impressive for an electric vehicle; it is made possible by the component that is at the very heart of the e-tron, the high-performance lithium-ion battery, working in tandem with technology that is specifically configured for an electric-drive vehicle. The vehicle s modest weight is the result of the rigorous application of lightweight construction principles combining an aluminum Audi Space Frame with fiberreinforced plastic. Particular importance was also attached to the sophisticated aerodynamics, which help not only to reduce drag, but also to optimize thermo-management. Because electric vehicles do not have the waste heat of an internal combustion engine as a resource, advanced energy management is furthermore used. An innovative heat pump with low energy consumption takes charge of heating the interior, while a highly efficient air conditioning system handles cooling. It also operates alongside the thermo-management to regulate the battery s temperature so as to optimize its performance and range. The e-tron also integrates a prototype of a car-2-x communication system, which for instance helps to improve the traffic flow and therefore further reduce energy consumption. A prototype of the Audi e-tron already became available for test drives in December 2009 and a small number will come onto the market at the end of At the Detroit Auto Show in January 2010, the Audi brand already showcased a second electric vehicle concept powered by two electric motors mounted on the rear axle: the Detroit showcar Audi e-tron. This sports car with an output of 150 kw (204 hp) can accelerate from 0 to 100 km/h in 5.9 seconds and achieves a range of up to 250 kilometers over the standardized driving cycle. PROCUREMENT One of the principal aims of procurement within AUDI AG is to establish a long-term partnership with the most efficient suppliers worldwide. The selection criteria to be met by suppliers include overall economy as well as the factors reliability, quality and innovation. In order to use any synergy potential, the selection process is handled in close consultation with Volkswagen Group Procurement. The cost of materials for AUDI AG in the 2009 fiscal year amounted to EUR 14,674 (18,940) million. This figure includes all raw materials and consumables used, as well as purchased goods and services. Procurement will continue to gain strategic importance in the future, along with the steady expansion of the Audi product range. Cooperation with suppliers, e.g. through their integration into the product development process, is therefore already being intensified. This paves the way

14 15 for promptly identifying methods of reducing the amount of materials used or using alternative materials. Non-economic aspects such as the use of recyclable materials are also part of the equation. The Logistics Center, an industry park in the immediate vicinity of the Ingolstadt plant, currently serves as the base for over 20 external operators that supply AUDI AG with a wide range of products and services related to car production. The arrangement permits an even closer partnership with these suppliers, alongside keeping information channels and transport paths as short as possible. A similar industry park was set up at Neckarsulm. AUDI AG s Technical Development and Purchasing Divisions jointly hold TechShows at which potential partners can demonstrate how efficient and innovative they are. In order to strengthen ties steadily with the supply industry, AUDI AG also regularly holds supplier events to promote informal exchanges and facilitate networking. Together with the Volkswagen Group, the Company also operates a web-based B2B supplier platform to speed up communication and therefore increase the efficiency of the procurement process to the benefit of all parties. Management Report 4 AUDI AG 9 Business and underlying situation 9 Economic environment 11 Research and development 14 Procurement 15 Production 16 Deliveries and distribution 21 Financial performance indicators 22 Social and ecological aspects 30 Risks, opportunities and outlook 39 Disclaimer PRODUCTION AUDI AG trimmed vehicle production in the 2009 fiscal year to 908,186 (984,828) vehicles, in response to declining overall demand. VEHICLE PRODUCTION BY MODEL Audi A Audi A3 43,641 57,158 Audi A3 Sportback 153, ,436 Audi A3 Cabriolet 9,782 18,570 Audi A4 Sedan 163, ,288 Audi A4 Avant 111, ,922 Audi A4 allroad quattro 9, Audi A4 Cabriolet 2,409 16,790 Audi RS 4 Sedan 320 Audi RS 4 Avant 330 Audi RS 4 Cabriolet 201 Audi A5 Sportback 20, Audi A5 Coupé 48,858 57,238 Audi A5 Cabriolet 15, Audi Q5 109,117 20,324 Audi A6 Sedan 139, ,001 Audi A6 Avant 37,354 52,854 Audi A6 allroad quattro 4,104 10,283 Audi RS 6 Sedan Audi RS 6 Avant 541 3,326 Audi A Audi Q7 27,929 59,008 Audi A8 8,599 20,140 Audi R8 Coupé 2,024 5,644 Audi R8 Spyder Total, AUDI AG 908, ,828 Production at Ingolstadt showed an increase on the high prior-year total, rising to 566,182 (531,200) vehicles in The higher production output is largely attributable to the successful product launches of the Audi A5 Sportback and Audi Q5 models. The launch of the Audi A4 allroad quattro likewise had a positive effect.

15 16 AUDI AG built 278,096 (327,296) cars at the Neckarsulm plant in the past fiscal year. Activities there focused on the successful volume production starts of the A5 Cabriolet and S5 Cabriolet, and of the new A8. Currently the most advanced press shop in Europe was also commissioned there in the fall; it represents a vital step in the implementation of the model initiative and brings further improvements in productivity. Automotive Lean Production Award In September 2009 AUDI AG won the coveted Automotive Lean Production Award, which was jointly sponsored for the fourth time by the trade publication AUTOMOBIL-PRODUKTION and the management consultants Agamus Consult (AUTOMOBIL-PRODUKTION, issue 10/2009, page 26 ff.). This competition places the spotlight on improvements to production processes. The streamlined production processes for assembly of the A3 car line at the Ingolstadt plant were singled out, with their efficiency representing a benchmark in the automotive industry. Audi Q3 production in Spain AUDI AG announced its choice of production location for the Audi Q3 in April of the past fiscal year. The new, compact SUV generation will be built at the main plant of SEAT S.A. in Martorell (Spain). Production will start in 2011 with an annual capacity of up to 80,000 units; the capital investments involved amount to some EUR 300 million. New Logistics Concept The New Logistics Concept (NLK) is a forward-looking project within the Audi Production System that helps AUDI AG to achieve its strategic corporate objectives. The priorities of the NLK involve focusing logistics processes on value creation, eliminating errors and waste, and reducing the throughput times from the supplier to the point of installation. In addition to bringing cost savings and productivity gains, it therefore also seeks to deliver quality improvements. DELIVERIES AND DISTRIBUTION The Audi brand continued to demonstrate its strength throughout the crisis, with 949,729 (1,003,469) cars delivered worldwide in Thanks to its fresh, attractive product range, deliveries of models with the four rings were a mere 5.4 percent down on the record figure of the previous year. As a result, the volume target of 900,000 units announced at the start of 2009 was significantly surpassed. Demand for Audi models clearly outperformed the overall market for premium cars in many key sales markets. The Audi brand consequently increased its market share of the premium segment in those same markets. In Europe, the Audi brand outperformed the overall market in the premium segment in virtually all markets and delivered a total of 618,854 (709,677) cars to customers. In the home market Germany, total deliveries in the past fiscal year reached 228,844 (258,111) Audi vehicles. As a premium brand, Audi nevertheless benefited only marginally from the government environment bonus that fueled demand mainly for cars in the small and compact segment. In many export markets throughout Western Europe, Audi deliveries initially held up much better than the rapidly contracting markets themselves up until mid In the latter part of the year, the introduction of state aid programs subsequently bolstered demand mainly for small and compact cars. Although the Audi brand, with its premium models, was unable to profit to any significant extent from the government incentives, the Company achieved a total delivery volume of 359,465 (408,873) vehicles in Western Europe (excluding Germany). This promoted it to market leader in the premium segment.